Now What? Reading Trump Tea Leaves on ITC Section 201 Solar Case

The International Trade Commission has filed its remedy recommendations for the Section 201 case filed by Suniva & SolarWorld. These recommendations will be submitted to President Trump no later than November 13 and the President will make a final decision within 60 days whether to apply, ignore, or change the remedies before committing them to policy. While Trump is the most…erratic…decision maker we’ve had in the White House in recent decades, there are personality tendencies and external factors that can inform us of likely outcomes.

Whether attributed to core psychology or the result of growing up in the cutthroat world of NYC real estate, it is no great secret that Trump indulges the strongman tendencies inherent in his zero-sum, us vs them paradigm of the world. It’s well-documented that he’s not bigon details, has a shortattention span, and is known to change his mind or statements based on the last conversation he had.

Beyond his own personal tendencies, President Trump has a mix of advisors around him pulling in different directions. Advocating the pro-tariff argument will be the “economic nationalist” folks like Steve Bannon and his protege Steve Miller (don’t make the mistake of thinking that Bannon doesn’t have influence just because he’s left the White House). On the other side, you have free trade “globalists” like NEC Director, Gary Cohn and Treasury Secretary, Steve Mnuchin. While Cohn and Mnuchin will be making strong arguments aligned with the Heritage coalition in the ITC hearings, Bannon and Miller’s cohort have the direct line to Trump’s die-hard base.

It’s also worth mentioning that – given his appointments of climate deniers to scientific positions – health, environmental, and other quality of life arguments aren’t going to have much weight with this President. Throw into the mix a Secretary of Energy who seems to be ignoring even his own oil & gas posse to push FERC toward subsidizing coal and nuclear power in the name of “baseload reliability,” and it’s unclear how much detail or explanation of the energy economy will resonate with the President either.

On top of all of this, there’s the real wildcard – the President is traveling to Asia November 3-14 including two days of bilateral meetings with Chinese Premiere Xi Jinping. This comes after Xi just successfully executed a power consolidation that significantly strengthened his own position juxtaposed with a progressively weakening US President roiled in scandal and without any moral authority to challenge the Chinese leader’s own strongman maneuvers. Xi has some previous experience with Trump after his earlier visit to the US, which included an explanation of the complicated nature of China’s relationship and influence on North Korea. It’s a safe bet that Xi is going to bring this issue up in his meeting with Trump. The question is how he presents the issue. Unlike the NYC real estate market where cutthroat competition is predicated on the inherent scarcity of the market, the global demand for solar panels is only increasing. China’s domestic demand alone is projected to be 4x that of the US in 2017. Suffice it to say, we need them more than they need us.

So what does this all add up to? Trump has three likely courses of action.

Option 1: Accept the ITC recommendations – This is most likely if (1) the President listens to the Bannon-ites around him and wants to stick it to the Asian manufacturers, (2) finds the nuance, arguments, and multiple upstream and downstream variables of the energy market too complicated and detailed, and (3) on his desk when he returns from Asia, it will be the most recent message in front of him before making a decision. There’s a 40% chance of this decision.

Option 2: Ignore the recommendations – This will be the argument from Cohn and Mnuchin in addition to SEIA and others. As climate, health, and even jobs are likely to have little impact, it’s going to be important to have the “if it ain’t broke, don’t fix it” case made not just from solar advocates or free trade think tanks but also major industries that matter to Trump such as tech, manufacturing, and real estate. It would also be extremely useful to get Secretary Perry to vocally support this option. How Xi manages ‘face’ regarding Trump on his visit could also have a major impact on this result. There’s a 20% chance of this decision.

Option 3: Target China – This option is where the Asia trip wildcard and Trump’s strongman tendencies combine. If the President leaves China feeling weak or losing face to Xi, it’s quite possible he’ll lash out and use solar tariffs to do it. Trade penalties on Chinese solar panels play into his us vs them paradigm; responds with ‘economic nationalism’ language that resonates with his base; allows him to ignore the details of the larger energy economy; and, in some circles, will prove a nice headline distraction for a day or so to the Mueller investigation. Will it also embroil us in an unfair trade case at the WTO? Highly likely. Does the President care? Almost certainly not. The probability of this outcome is 30%, but is heavily dependent on how Xi handles the meeting with Trump and his ego – and one should never underestimate the Chinese sensitivity to ‘face’ in getting what they want.